Great Recession and Labour Market In Italy: The Case of Albanian Immigrants

The Great Recession, one of the biggest crisis since the Great Depression of 1929, resulted in dramatic consequences for the economies of many countries in the world, with declining GDP and consumption, falling exports, rising unemployment, growth of layoffs, etc. One of the most serious consequences of the crisis regarded labour markets, with a rapid increase in unemployment and reduction of employment rates, affecting also migration patterns. In particular, the Great Recession hit immigrants hard, and almost immediately, in most OECD countries, with a more pronounced impact than for the native-born population. The recession affected Italy in two different periods: first, during the diffusion of the 2008 global financial crisis and, second, during the sovereign debt crisis that started in 2011. Immigrants and the Great Recession are the two main topics of this dissertation and, even if much research has been undertaken to study the effects of the Great Recession on overall labour market dynamics, less is known about the impact on immigrants and how it has evolved over the business cycle. Understanding how immigrants were affected is particularly important for Italy, given the recent substantial increase in migration inflows and in the share of foreign population (immigrants reached 8.2% of the Italian population in 2015). This dissertation attempts to fill this gap by identifying the labour market impact of the Great Recession on Albanian immigrants compared to natives, and how this relationship has evolved since the beginning of the downturn. We focus on Albanian immigrants because they are the largest ethnic group coming from Europe and the second community among non-EU nationals legally residing in Italy. In addition, Albanian immigrants appear to have been hardly penalised by the Great Recession, recording in 2015 one of the lowest employment rates in Italy (51%, compared to 56% of natives). Furthermore, Albanian immigrants are a unique case because over a million Albanians (about one third of the population) live abroad (EC, 2012). In this perspective, the objective of this dissertation is to study the impact of the Great Recession on the Italian labour market, assessing whether there has been a different impact of the recession on Albanian immigrants compared to natives. The empirical analysis is based on microdata from the Italian Labour Force Survey (ILFS) for the 2007-2015 period. Results from descriptive statistics, probit estimates and fixed effects estimates (based on a “pseudo panel” dataset) confirm that Albanian immigrants have been hardly penalized by the recession in their employment probability, mainly in years 2012, 2013 and 2014 and the employment gap with the natives has been widened by the downturn. In particular, descriptive statistics showed for Albanian immigrants a loss of 10.48 percentage points from 2007 to 2013 (compared to -2.81% of natives) resulting in an employment gap from natives of 5.23 percentage points in 2015. Probit estimates showed a total loss (relative to natives) of 8.9 percentage points from 2007 to 2013 (compared to the -6.7% of Eastern European immigrants). However, fixed effects estimates showed that the deteriorating labour market performance of the Albanians was not due to genuine ethnic discrimination, but it was the consequence of the fact that Albanian immigrants were more concentrated in socio-demographic groups and industries there were more severely hit by the crisis, such as the young, the low educated and the manufacturing and construction sectors.